Class, austerity and inequality

Welfare cuts and far-reaching reductions of the welfare state continue to be centrepieces of the Tory government’s approach to debt reduction. This approach has already failed those facing poverty and failed to address government debt. If Greece tells us anything, it is that ‘austerity’ not only contracts government expenditure (at least for socially necessary services and outcomes) but also government income. So in Greece, imposition of cuts led to increasing not decreasing government debt and further welfare cuts.

Thus, our argument is that not only have anti-poverty measures failed but that they have failed because they are linked to the constraints and ideology of an approach to welfare which focuses upon regressive redistribution from above, namely, redistribution which is leading to rising income and wealth for the already affluent at the expense of the poorest.

Much has been written about poverty and how to address it. However, the class politics of poverty have often been neglected. Poverty is no accident but represents the inevitable outcome of a market driven society – and one in which particular class interests, which neoliberalism is its latest ideological formation, works to increase wealth accumulation by the rich.

How we approach the question of poverty and explain its origins is crucial to how it is understood and the policies that consequently result. Only an anti-poverty strategy that empowers the poorest to gain greater income and provides greater bargaining power to workers in the labour market can adequately address poverty. This means, primarily, increasing the ability of workers and unions to force employers to divert higher shares of profits to wages as opposed to dividends and high managerial salaries. Work can only be a route out of poverty if workers have the power to bargain for decent wages and conditions. The assault on unions and collective bargaining reflects the determination of the Westminster to further the share that goes to profit and dividends.

Poverty and inequality continue at historically high levels evident since the mid-1970s. Attacks on union rights with successive anti-union laws, as neo-liberal policies were introduced, paved the way for the dramatic rise in poverty and income inequality. For example, before 1979 child poverty levels were below 15% before rising to its highest levels of over 33% by the late 1990s and subsequently falling back to levels of around 29% in 2009/10. Scotland’s picture is not substantially different to that of the rest of Britain with Scottish Government statistics showing that 22% of children were living in poverty in 2014.

Poverty in Scotland is concentrated in urban centres such as Glasgow, Dundee and in other towns across the country. This is paralleled within English cities such as Manchester, Liverpool and equivalent population centres, and in places in London such as Tower Hamlets. Central to explaining this distribution is the collapse of higher paid patterns of work and its replacement with lower paid patterns of work since the 1970s. Alongside this sits higher income inequalities with Scotland again at the higher end of the spectrum evident within Britain. In general when it comes to poverty, income inequality or wealth inequality only London and the South East exceed that of Scotland.

The reason we should choose the mid-1970s as our comparison is that this is the era when economic and social policy changes, initiated by the Callaghan then ramped up under Thatcher, drove the attack on the labour movement and social welfare. Vital to these changes were an economic policy focused upon monetarist ideas, an assault on union influence in the workplace and an approach to social policy which penalised the poor through increasingly means-testing of welfare benefits. ‘Choice’ and the lifestyles of people who were disadvantaged and poor were identified as the main drivers of inequality. Blaming the victim became the order of the day and that remains so.

The linking of the increase in poverty and inequality with the undermining of unions and workers’ rights is also of significance for understanding the persistence of high levels of poverty despite major changes in patterns of poverty. One of these most important changes during these years has been the transition from poverty being a result of ‘worklessness’ to one in which ‘in-work’ poverty is now the dominant characteristic of those experiencing poverty today. The extent to which in-work poverty is the dominant feature of poor households indicates the failure of the ‘work as a route out of poverty’ approach by the successive governments since the 1990s. In Scotland, latest figures show 50% of working-age adults in poverty live in households where adults are working and 56% of children in poverty live in households where adults are working.

Britain, Scotland included, has the highest levels of labour force participation rates historically. Women and men are equally likely to be in employment and poor households are most likely to have adults in work. Poor workless households are now increasingly likely to be trapped in poverty for specific reasons, with adults who are pensioners, adults who are carers or with disabled adults yet they still remain subject to the nineteenth century language of moral failings and the absence of individual responsibility.

The explanation for why this matters to the left is that these high levels of poverty and inequality are testament to the failure of anti-poverty strategies adopted by successive British and Scottish governments and local authorities who continue to administer them. Within the realms of social policy, despite the language of tackling poverty, the reality has been the opposite; an extension of means-testing and the withdrawal of social security benefits has been the picture since the mid-1970s.

The ever increasingly draconian nature of repeated rounds of welfare ‘reforms’ – for which read ‘cuts’ – are a feature of the increasingly penalising nature of the current welfare system. The mainstream political consensus around the capping of annual benefits, sanctioning the unemployed and the removal of disability benefits are but the latest versions of this war on those who are disadvantaged and experiencing poverty. Underpinning this is a Malthusian ideology in which a distinction between the ‘deserving’ and ‘undeserving’ has been utilised to abandon the use of taxation as a means to deliver redistributive outcomes, at least progressive redistributive outcomes.

Neo-liberal hostility to progressive forms of redistribution from rich to poor have also ensured high levels of poverty have been accompanied by high levels of income inequality. Income growth for the highest paid 10% has continued to grow at a higher rate than for the lowest 10%. A recent study for the Centre for Analysis of Social Exclusion estimated between 1961-2012 incomes for the highest paid 10% grew by 130% while for the lowest paid 10% incomes grew by only 89%. In Scotland, the ratio between the highest paid 10% and the lowest paid 10% is at its highest level since the mid-1970s and the difference between the incomes of the top and bottom 1% is now over twenty times. Stirling-based economist, David Bell, noted: ‘… it is hard to avoid the conclusion that the major increases in inequality that have taken place over the last few decades were related to the industrial restructuring that took place during the 1980s’.

Where labour has the ability to bargain for higher pay or greater employment the outcome is a rise in household income for the lowest in income distribution. This has to be encouraged at the expense of growing income and wealth for employers and shareholders. In Scotland, we have seen two important strikes in the first half of 2015 which exhibit exactly these two features, namely, all-out strikes by Dundee hospital porters, members of Unite, and the Glasgow homeless caseworkers, members of UNISON. Both were against low pay, demonstrating the ability of low paid workers to redefine the bargaining environment. Importantly, both were won by members’ determination in using industrial action. In Dundee, porters won their demand for a higher pay grade and an £1,800 back payment and overturned the drive to casualisation by winning a 10% increase in jobs through the NHS Trust having to employ the fixed term workers on permanent contracts. The Glasgow homeless caseworkers strike had a similar outcome.

If the SNP Scottish Government was serious about anti-poverty strategies, it would look at what limits the development of workers’ power in the workplace. While the anti-union laws, and employment law more generally, remain reserved areas of legislation, there are still ample devolved areas where labour could be empowered. Procurement policy already permits the removal of contracts from anti-union firms (such as blacklisting construction companies). Yet this is not an area in which the Scottish Government has enforced its own powers, even in construction projects controlled by SNP local authorities (such as the £1bn investment project at Dundee’s Waterfront development). Government procurement policy can also require a Living Wage from contractors. Elsewhere in the public sector, the Scottish Government’s development of Outcome Agreements with public bodies could ensure greater power to union representatives and union recognition.

We have argued inequalities in the workplace are central to understanding the inequalities in society. Resolving this requires recognising these linkages and seeking to ensure maximum solidarity between those in work and those out of work. We need a return to notions of social security for all. In this struggle, the labour and anti-austerity movements have a crucial role to play.

Carlo Morelli teaches at the University of Dundee and Gerry Mooney is at The Open University in Scotland. Both are members of the Socialist Workers Party in Scotland.